The Fine Print of Grubhub’s $100 Million Relief Program for Ailing Restaurants
Ordering delivery has become a key way for diners to support restaurants — if not delivery drivers — as dining rooms around the country shut down to stop the spread of the new coronavirus. Earlier this week, Grubhub made news by announcing that it would defer collection of up to $100 million in commissions as its way of helping the restaurant industry in a time of crisis. It’s a big number, making it all the more notable that Grubhub is asking for that money back down the line.
Grubhub isn’t decreasing or waiving commission fees, and some restaurant owners are criticizing the delivery company for publicizing its program as aid or financial relief.
“To many of us in the restaurant industry, the Grubhub announcement rang out as a hollow PR move,” says Estelle Bossy, a New York-based beverage consultant. “Sure, it sounds great to delay payments and free up a bit of cash, but Grubhub profits by taking a 15 to 30 percent commission from each delivery, so why not really help out and reduce the commission itself?”
The deferral program only applies to Grubhub’s marketing commission fees, which is what restaurants pay to appear on Grubhub’s platform, and it’s only for restaurants that are eligible to be a part of the program.
Restaurants that apply and are granted the deferral will still pay other fees, including for delivery and order processing. Additionally, in the program’s fine print, among the terms and conditions of the agreement, is a stipulation that restaurants agree to keep Grubhub as a delivery service for one year after signing onto the program.
It’s unclear how long the deferral will last, though a term sheet sent to restaurant owners states that it “will end on a date to be determined by GH in its sole discretion, although GH currently anticipates that such date will be no later than March 29, 2020.” Once that time is up, restaurants will have four weeks to repay the deferred commissions, after a two-week grace period in which they make the regular commission payments of between 15 and 30 percent.
Grubhub makes clear the deferral program is entirely optional — indeed, restaurants must apply to it — but the outbreak has placed many restaurants in a dire financial situation with few remedies. Delaying payment on commissions while simultaneously increasing — or getting into — delivery could leave restaurants with a huge tab once the pandemic subsides, especially if they postpone their financial pain in other ways, like by selling gift cards.
By comparison, competing delivery service Doordash has announced its own relief program that reduces but does not entirely eliminate commission fees during the crisis.
The company is offering 30 days of commission-free delivery for new restaurants, removing commissions on pick-up orders, and reducing commissions for restaurants on DashPass, the company’s subscription service. (Another competitor, Uber Eats, in its missive about “supporting the restaurant industry through an uncertain season” — URL slug: “food not finances” — says that it is waiving the delivery fee paid by consumers for “more than 100,000 independent restaurants” in order to drive sales, but makes no mention of reducing or waiving the commission fees that restaurants pay to Uber.)
Social distancing measures have even pushed some fine dining venues into the takeaway market, but the coronavirus outbreak has also highlighted growing tensions between restaurants and delivery services. Earlier this month, the New York City Council proposed legislation that would cap commissions at 10 percent and require disclosure all fees that delivery companies charge restaurants, among other regulations that would slightly tilt the balance of power back toward restaurants. Doordash and Postmates have both received flack in the last year for delivering food without permission from restaurants, while Grubhub faced a class action lawsuit in 2019 in which restaurants alleged the site was charging restaurants for calls that weren’t orders.
Still, restaurants rely on third-party delivery services for the ease and visibility they offer, and at a time when delivery and takeout is the only option for serving customers, using Grubhub and its competitors is (mostly) hard to avoid.
In addition to its delayed commission program, Grubhub is routing all of the funds from its Donate the Change program to “charitable organizations that support restaurants and drivers impacted by the COVID-19 health crisis,” allowing customers to make a small contribution to COVID-19 relief. But for there to be any independent restaurants left to pay its commission fees, Grubhub and the rest of the delivery platforms will need to offer some real relief of their own.